Russia halts delivery of gas to Ukraine

Energy feud escalates into mid-winter boycott.

Energy feud escalates into mid-winter boycott.

January 02, 2009|PHILIP P. PAN The Washington Post

MOSCOW -- Gazprom, the Russian gas monopoly, followed through on a threat to halt delivery of natural gas to Ukraine on Thursday, as the former Soviet republic's feuding leaders united behind a demand that Russia pay more to ship fuel through Ukraine to the rest of Europe. The cutoff began as scheduled at 10 a.m. after talks between the two nations over a new energy contract broke down. But Gazprom said it was increasing shipments intended for other European nations to avoid a mid-winter disruption in gas needed for heating and electricity. Energy companies in several European countries reported seeing no drop in supplies as a result of the Russian move against Ukraine. A similar cutoff in 2006 resulted in gas shortages in several parts of Europe, but analysts said most countries have enough gas stockpiled this time to last several days without Russian gas. Russia supplies a quarter of the gas that Europe uses, and most of it is delivered through Ukrainian pipelines. The current dispute centers on Russia's desire to charge higher prices for gas next year and collect more than $2 billion in debts run up by Ukraine for gas this winter. But as in previous years, the commercial issues have been complicated by Moscow's tense relations with Ukraine's fractured, pro-Western government and by an intense rivalry between Ukraine's president, Viktor Yushchenko, and its prime minister, Julia Tymoshenko. In a joint statement Thursday, Yushchenko and Tymoshenko called on Russia to resume talks to resolve the standoff and continue providing fuel to Ukrainian consumers at last year's prices until a new contract is reached. They offered to pay $201 per 1,000 cubic meters of gas but also demanded Russia pay at least 15 percent more for using Ukraine's pipelines to deliver gas to its other European customers. Russia had offered a price of $250 per 1,000 cubic meters of gas before the talks collapsed, but insisted Ukraine honor what it said was an existing contract fixing delivery fees through 2010. Gazprom warned two weeks ago that it would suspend gas supplies if Ukraine failed to pay off its debts and sign a contract for next year's deliveries by midnight Wednesday. As the deadline approached, Alexei Miller, chief executive of Gazprom, said Ukraine had met neither requirement. Russia stopped sending gas to Ukraine for three days in January 2006, but the current standoff could be more severe because the global financial crisis has left both countries more desperate for funds. Ukraine is struggling to avoid an economic meltdown, and Russia has been hit hard by falling energy prices. In a news conference before the talks unraveled, Gazprom officials accused Ukraine of trying to "blackmail" Russia and the European Union, saying its state energy firm had threatened to confiscate gas intended for European customers if a contract with Russia could not be drawn. Russian Prime Minister Vladimir Putin warned on state television of "quite serious consequences" for Ukraine's relations with Russia if Ukraine acted on that threat. The Ukrainian government, which says it has enough reserves to meet domestic demand for three months, has repeatedly promised safe transit for gas to Europe.